Thursday, 23 April 2015

HBO NOW, Netflix, and VPNs: A Tale of Two Online Streaming Services and the Three Little Letters That Disrupt Their Business Models


Less than a month after the launch of HBO NOW, the online streaming service declared war on VPN users worldwide. According to TorrentFreak, paying customers in countries such as Australia, Canada, Germany, and the UK who have been using VPNs and other methods to access the US-only content were recently greeted with the following message from HBO NOW:

“It has come to our attention that you may have signed up for and viewed video content on the HBO NOW streaming service from outside of the authorized service area (the United States, including D.C. and certain US territories).

“We would like to take this opportunity to remind you that the HBO NOW streaming service is only available to residents of the United States, for use within the United States. Any other access is prohibited by our Terms of Use.”

The announcement concludes with a number to call to prove one’s eligibility; otherwise, customers should expect their accounts to be deactivated without refund.

Online streaming services such as HBO NOW face competing priorities in attracting as many paying customers as possible versus honoring their country-dependent licensing deals. Unfortunately for the average Game of Thrones lover, this week’s crackdown proves that HBO NOW values its outdated business model more than its consumers. And sadly for HBO NOW’s revenue, the company may have just turned paying, workaround-friendly overseas customers into people willing to pirate its content for free.

If HBO NOW hopes to live long enough to truly compete with Netflix, it would be wise to follow the 18 year old’s lead regarding VPN usage. Last week, ZDNet brought attention to April 16’s WikiLeaks revelation: email documentation shows that Netflix resisted Sony’s pressure to crack down on ‘circumvention websites’ in 2013. Keith Le Goy, Sony’s president of distribution, complained, “Netflix are heavily resistant to enforcing stricter financial geofiltering controls, as they claim this would present a too high bar to entry from legitimate subscribers. For example, they want people to be able to use various methods of payment (e.g. PayPal) where it is harder to determine where the subscriber is based. They recognize that this may cause illegal subscribers but they (of course) would rather err that way than create barriers to legitimate subscribers to sign up.”

Instead of confirming the whereabouts of each of its subscribers, Netflix has chosen to work towards global licensing of its content, which it hopes to complete by 2016. According to Netflix’s head of content, Ted Sarandos, “The best way to make the VPN issue a complete non issue is through global licensing that we’re continuing to pursue with our partners.” The company recognizes that if it continues to offer the best content at the best prices to only its American customers in a world in which VPNs allow internet users to appear to be anywhere, the rest of the world is not going to settle for second class global citizenship. 

VPN users worldwide have spoken. Regardless of whether a person is an Australian, an American living in Australia, an American on a business trip to Australia, or an American unwilling to watch a movie on public wi-fi in his nation’s capital, he wants equal access to equal content. Online streaming services need to recognize that current licensing agreements don’t meet the needs of today’s consumers. HBO NOW should put an end to its customer witch hunt and start addressing consumer demand.

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